More and cheaper advice on way

Financial advice costs will halve, the amount of advice provided will almost double and the number of financial advisers is expected to fall by about 25 per cent under reforms being proposed by the federal government, Rice Warner Actuaries predicts.

Its analysis, commissioned by industry fund lobby group Industry Super Network, claims abolishing commissions, providing different levels of advice and raising standards will also improve the real income of financial advisers.

Rice Warner concludes that those seeking full advice, which involves expensive profiling and analysis, will, over a decade, grow to equal those wanting less sophisticated advice, generating more demand and assets under management.

“Others who are currently deterred from obtaining advice will decide to seek advice when their perception of bias is removed," it says.

The research was undertaken before the “future of financial advice" proposals were announced last week by the Minister for Financial Services and Superannuation,
Bill Shorten
. But its findings remain relevant because the ­government’s recommendations were largely consistent with the intent of the draft proposals announced last month.

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“We are in business day-in and day-out addressing the investment needs of millions of Australians," said Association of Financial Advisers chief executive Richard Klipin, who represents about 7000 advisers.

“We know all about the impact of higher costs and more red tape. The simple logic is that costs will increase for businesses and clients."

His claims have been backed by
Mathias Cormann
, opposition spokesman on financial services and superannuation, who said proposed reforms failed to “strike the right balance between appropriate levels of consumer protection and ensuring the availability, accessibility and affordability of high-quality financial advice." Mr Whiteley challenged critics to provide evidence. “These claims from planners about higher costs are repeatedly asserted, but not proved. Our study provides evidence to the contrary."

According to the Rice Warner research, the average cost of advice is about $3370, or about $3650 for complex and $325 for simple advice. In just over a decade, the expense would almost halve to $1740, mainly driven by the increase in demand for simple advice.

“Introduction of more efficient adviser delivery models for simple advice combined with productivity and efficiency improvements will lead to both simple and comprehensive advice being provided," its report concludes.

During that period, the numbers of financial advisers would slide by about 23 per cent with a reduction in overall adviser remuneration of about $2.9 billion, not adjusted for inflation.

“This amount will flow directly into increased superannuation and other savings by individuals," the report states.

The number of annual consultations will more than double to about 1.64 million. Rice Warner’s analysis was based on the comments of 1700 respondents, ranging from young savers through to retirees.